Harrisburg receiver William Lynch and state officials late Monday filed their long-awaited debt recovery plan for the city, which at first glance looked as complex as the deals that impoverished Pennsylvania’s capital city.
Boiled down,
Major incinerator financing creditors Assured Guaranty Municipal Corp. and Dauphin County the former is the bond insurer stand to take an $89 million haircut, but could recoup money long-term through the parking deal. Lynch, a retired Air Force general who succeeded David Unkovic as receiver in May 2012, announced last month that creditors had agreed to concessions.
“Assured Guaranty is committed to working cooperatively with the Harrisburg receiver and other stakeholders to implement a recovery plan that both restores the city’s fiscal health and respects the rights of creditors,” New York-based Assured Guaranty said in a statement. “As always, investors that own Harrisburg bonds insured by Assured Guaranty can be certain they will continue to receive their principal and interest payments on time and in full in accordance with the terms of Assured Guaranty’s insurance policies.”
Bond financing overruns to an incinerator retrofit project have left Harrisburg with $360 million of debt on the trash-burner alone, putting the city on the brink of bankruptcy.
“Harrisburg deserves a bright future. A financially strong pathway to that future and Harrisburg’s pre-eminence as Pennsylvania’s iconic capital city lie ahead with the plan,” Lynch said in the report.
The plan also calls for a balanced budget in 2013 and an expectation that Harrisburg will balance its budget for the following three years. According to Lynch, $5 million will serve as working capital to pay down high levels of payables owed to providers of goods and services.
It also called for up to $10 million over the next several years to foster “meaningful economic development” and a further $10 million over several years for infrastructrure repair.
“This process has been a model for cities under financial stress to work through financial challenges without seeking municipal bankruptcy,” said Mayor Linda Thompson, whose four-year term will end Dec. 31. “This transaction is possible because the stakeholders agreed to accept less than ideal individual solution to assure a solution amenable to all parties.”
The creditor haircut appeals to Harrisburg city councilman Brad Koplinski.
“I and my colleagues have consistently pushed for a global solution with shared pain. While I am cautiously optimistic, I believe that is what we have here,” said Koplinski, who is running for lieutenant governor on a theme of helping distressed cities. “The receiver’s team has come up with some innovative solutions in financing our debt, including using vehicles like tax-exempt bonds.
“We are selling the incinerator and leasing our garages without losing our stream of revenue. The creditors have come to the table, the commonwealth has been helpful and the taxpayers are not bearing the full extent of the burden, as some thought should happen.”
The City Council is scheduled to vote Tuesday night on some housekeeping matters pertaining to the plan.
Koplinski repeated his call for federal investigations into the bond deals, and was pleased at Attorney General Kathleen Kane’s recent announcement that her office would also investigate.
Mark Schwartz, who represented the Harrisburg City Council in its unsuccessful attempt to file bankruptcy late in 2011, said lawyers and consultants who worked on the bond deals, not Harrisburg citizens whose annual income averages around $26,000, should pay up.
“This weighty report could be fodder for the incinerator. They could throw it into the incinerator, then the incinerator could charge accordingly and settle the debt,” said Schwartz, a Bryn Mawr, Pa., solo practitioner.
